Narrowing Cigarette Price Gaps Noost PMI''s Optimism

Source from:  Manila Bulletin 02/09/2015

Tobacco giant Philip Morris International (PMI) is expecting a much favorable business environment in the Philippines this year as price gaps between its brands and local rival's cigarette products narrow.

Andre Calantzopoulos, PMI chief executive, said yesterday that price movements at the lower end of the market are positive developments for its local unit Philip Morris Fortune Tobacco Corp. (PMFTC) Inc.

"After we raised the recommended stick price of Jackpot from P1.25 to P1.5 in October, our main competitor increased the recommended stick prices of its brands by P0.25 in December and further increases have occurred since then,"　Calantzopoulos said.

The PMI chief said the price adjustment made by rival Bulacan-based Mighty Corp. reduced the stick price gap to Marlboro from P1.75 in January last year to between P1 and P1.25 currently.

"The price of per stick now of every brand that counts is at P2 or about, [hence] our price gaps are reducing. The Philippines definitely is not going to be of any negativity and if any, we will turn positive this year," Calantzopoulos said.

"I feel better now than six-months or three-months ago," he added.

But the PMI chief also said the company will remain "very careful" in the Philippine market.

"We believe that the introduction of tax stamps will further improve the competitive environment in a market where cigarette consumption remained resilient last year at around 100 billion units," Calantzopoulos said.

"These developments augur well for profitability to improve over the mid-term and we remain bullish on the prospects for this market," he added.

Meanwhile, PMI reported that the estimated tax-paid cigarette volume in the Philippines decreased 4.6 percent to 82.3 billion units last year from 86.3 billion in 2013, reflecting the "prevalence of domestic non-duty paid products."

While PMI's shipment volume of 68.4 billion units decreased by 0.2 percent last year, its market share of the estimated total tax-paid cigarette industry increased by 3.7 points to 83 percent.

According to PMI, premium brand Marlboro's market share increased by 1.7 points to 18.4 percent last year and share of cheaper brand Fortune increased by 1.8 points to 33.4 percent.

In the fourth quarter of 2014 alone, PMI estimated that Philippine tax-paid industry cigarette volumes decreased by 12.9 percent to 21.8 billion units, reflecting a "higher incidence of non-tax-paid volume."

While PMI's shipment volume in the quarter of 17.5 billion units decreased by 3.3 percent, PMI said its market share of the estimated total tax-paid cigarette industry of 80.3 percent was up by 8.0 points.

In the final three-months of last year, PMI said Marlboro's market share increased by 2.4 points to 19.3 percent and share of Fortune increased by 4.8 points to 31.5 percent. Enditem